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Drummond Report calls for full-cost water pricing

The Commission on the Reform of Ontario’s Public Services – chaired by economist Don Drummond – is calling for full-cost pricing for municipal water and wastewater services. Such pricing reforms will not only cover the costs of providing services but will also encourage conservation – “an area in which Canada desperately lags the world’s best.”

The Commission also gives a nod to the private financing of municipal infrastructure. It notes that capital investment in water and wastewater infrastructure falls short of actual needs by $1.5 billion a year, leaving many municipal systems in need of renewal. This chronic funding gap “poses serious fiscal risks.” Ontario’s fiscal challenges will make funding infrastructure even more difficult in the years ahead. The Commission suggests that “Alternative Financing and Procurement (AFP) could be a useful tool in this regard.”

Municipal water isn’t the only target of proposed pricing reforms. The Commission recommends that commercial and industrial water users pay for their use of water. Current fees do not cover the costs of water management programs. User-pay models, in contrast, would be in keeping with the principle that “Where the opportunity exists and where the beneficiary can be identified, the cost burden of providing these services should be placed on the beneficiary’s shoulders rather than the public’s.”

As with full-cost municipal water prices, the Commission suggests that commercial and industrial water charges would encourage conservation: Charges would “create a financial incentive for companies to use water more efficiently.”